Investing in Wheat Markets via Futures Contracts - dummies

Investing in Wheat Markets via Futures Contracts

The most direct way of accessing the wheat markets is by trading the wheat futures contract. The Chicago Board of Trade (CBOT) offers a futures contract for those interested in capturing profits from wheat price movements — whether for hedging or speculative purposes.

Here are the specs for the CBOT futures contract:

  • Contract ticker symbol: W

  • Electronic ticker: ZW

  • Contract size: 5,000 bushels

  • Underlying commodity: Premium wheat

  • Price fluctuation: $0.0025/bushel ($12.50 per contract)

  • Trading hours: 9:30 a.m. to 1:15 p.m. open outcry; 6:32 p.m. to 6:00 a.m. electronic (Chicago Time)

  • Trading months: March, May, July, September, December

Wheat is the second most widely produced agricultural commodity in the world (on a per volume basis), right behind corn and ahead of rice. No one country dominates wheat production. The major wheat producers are a surprisingly eclectic group.

The advanced developing countries of China and India are the two largest producers, while industrial countries like Canada and France also boast significant wheat production capabilities.

Top Wheat Producers
Country Production (Thousand Tons)
China 97,500
India 68,000
United States 50,970
Russia 42,000
France 36,500
Canada 26,000

Source: U.S. Department of Agriculture, 2006 figures

Wheat is measured in bushels for investment and accounting purposes. Each bushel contains approximately 60 pounds of wheat. As with most other agricultural commodities, metric tons are used to quantify total production and consumption figures on a national and international basis.

Wheat production, like that of corn and soybeans, is a seasonal enterprise subject to various output disruptions, which can have a magnified effect on futures prices.

To find out more about the wheat market, check out these resources on the Web: